Bank of Oklahoma Financial Corporation, the holding company that includes the Bank's funds from Oklahoma and several other states, is considering selling $200-300 million worth of 15-year, 6.5% Fannie Mae or Freddie Mac collateralized mortgage obligation bonds in order to buy similar 5.5% CMO paper. Lee Allen, portfolio manager of $3.1 billion in taxable fixed-income, says he is concerned the low-interest-rate environment will lead to a rise in prepayments. He said if the 10-year Treasury yield stayed below 5% for the next few weeks, or if the Federal Reserve cut rates by 50 basis points this Tuesday, he would take the plunge. Last Thursday, the 10-year Treasury was yielding 4.95%. Allen uses three-year PAC CMOs as a benchmark, and says his duration is roughly 3.0 years.
The holding company allocates 80% of its assets to mortgage-backed securities, 8% to agencies, 7% to tax-free municipal bonds, and 5% to preferred stock and related instruments.
